The Hallow is a new biome that is created once you have defeated the Wall of Flesh in the Underworld. It is an anti-Corruption biome and can be spread by planting Hallowed Seeds or throwing Holy Water and is most effective when used to counter the spreading of Corruption. However the corruption and hallow can spread over each other still, just very slowly.
The biome has light blue grass and colored trees, and the background has a big rainbow. It is home to Unicorns, Pixies, and Gastropods. (Only at night will the Gastropods spawn)
The Hallow has its own underground level, the Underground Hallow, primarily made of Pearlstone, a white colored Ebonstone-like block converted from normal stone. Much like Ebonstone, Pearlstone takes longer to dig than normal stone. To dig Pearlstone, you need at least a Nightmare Pickaxe, which is made from Demonite.
from left to right: hallowed grass, pearlstone, pearlsand, pearlstone brick.The hallow during night time.
The Dryad can say what the percentage of Hallow and Corruption is in the world, once the Wall of Flesh has been defeated. The Hallow can spread both on the surface and Underground.
Purification Powder has no effect on the hallowed ground; However, Vile Powder can return hallowed ground to the default biome of the world
This illustration demonstrates the spreading of The Hallow through vines.
Spreading
This illustration shows how hallow spreads across gaps. Hallow was added to the right side of each section.
The rules for spreading The Hallow are as follows:
Pearlstone and Pearlsand blocks will spread The Hallow to adjacent stone, sand, and grass blocks (pearlstone will not spread The Hallow to dirt blocks without grass growing on them).
When planted, hallowed seeds will spread The Hallow to adjacent dirt, stone, sand, and grass blocks.
The Hallow cannot spread to mud blocks; therefore, the Hallow cannot spread through jungle.
Sunflowers will not impede the spreading of The Demonstration of placing barriers. Notice how the bricks prevent The Hallow from spreading through them.Hallow.
Hallow will not spread through gaps in the environment that are three or more blocks across.
Hallow will not spread through synthetic blocks (ie. materials such as Gray Brick) that are three or more blocks across.
Vines growing from hallowed ground can spread The Hallow through proximity.
The Hallow can be planted in a world where the Wall of Flesh has not been killed but it won't spread through sand and stone. It will spread the hallow grass over default grass, however. If the Hallow is created underground, Chaos Elementals can spawn, but neither they nor any other monsters will drop Souls upon death. Crystal Shards also won't grow in pre-WoF world.
Notes
While The Hallow does (mostly) prevent Corruption from spreading, the creatures spawned within are still on-par with other post-Wall of Flesh content.
If you want to get rid of the Corruption (after beating the Wall of Flesh of course) an easy way would be to spread the hallow there with hallow seeds, some holy water or by placing different Hallow blocks.
The Hallow shows some resemblance to the Forest in "The Lorax" by Dr. Seuss.